Meritor’s ex-CEO makes out by “departing”

June 11, 2013

Anyone who’s ever been fired before — and, yes, we have some first-hand experience in this department — knows that things can be a bit unsettling, at least in the beginning, until you figure out whatever is next. CEOs, of course, are fired all the time — no matter how the press release spins things — though that period of unsettlement is rarely quite so severe.

Exhibit A comes from this 8-K filed at 5:12 pm last Friday (footnoted regulars know that’s prime Friday Night Dump time) by Meritor Inc., an auto parts manufacturer based in Detroit. Back on May 3, the company announced that longtime CEO Chip McClure was “departing” the company and that board member Ivor Evans would take over on an interim basis, but provided few additional details. Since then, the company has put out 10 additional press releases about various aspects of the business. But it waited until last Friday to flush out details on McClure’s departure.

As the 9-page agreement attached to the 8-K shows, McClure isn’t exactly leaving empty handed. Indeed, he’ll receive $1.2 million a year for the next three years, plus a pro-rated bonus for this year and company-provided health insurance through April 2016. Unlike many other “departing” CEOs, Meritor isn’t accelerating the vesting on McClure’s options. But he’ll have three years and three months to exercise them — what the company’s attorneys describe as a “separation period”.

Right now, those options are very underwater, according to the most recent proxy statement filed in December. But that could change. Already, Meritor’s stock is up 25% in the five weeks since McClure left. Keep in mind that according to this Form 4 from Dec. 5, McClure already owns about 1.3 million shares, so that’s yet another way getting fired has helped his bottom line.

When you add it all up, it works out to over $12 million, and that’s not even counting the roughly 1 million options and restricted shares that the proxy spells out.